Coral Reef Legend: Elfie of the Blue Sea 1986

In the future, the oceans have risen to flood all the continents due to humanity's negligence of the environment. Only a few bits of land have been spared, and one of those is the city-island where Elfie lives with her grandfather. One day, due to an underwater incident, she discovers that she can breathe underwater. Her grandfather reveals that in truth she is one of the mythical sea-people. Using the city folk's xenophobia, local politicians spark a war with this hidden people to distract people from their current resource problems, and Elfie is caught in the middle of it.